Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003f.jpg" align="left" border="0" height="265" width="353">
Retail sales in the Euro Area rose in August. The rise was
small but it marks the second monthly rise in a row. Still the growth
rates over 3 months, 6 months and 12 months are all hovering in the -2%
range (saar) for the Area. The
bottom of the table shows country by country results for Germany, Italy
and the UK. The volatility in country level sales has been substantial.
Germany saw sales volume spurt by 4.1% (ex-auto) in August. UK sales
volume rose by 1.2%. Still over three months UK sales are off at an
8.1% annual rate. German sales over three months are up at a +2.4%
pace. There is a lot of volatility in Europe. While this report seems
to show some resiliency, consumer plans to buy still seem to be skewed
sharply lower (see chart). Consumer
sentiment remains weak and the industrial sectors across Europe are
still weakening. The rise in retail sales in August seems to be more of
an anomaly than proof of resiliency.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area 15&nbsp; Retail Sales Volume </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area 15 Total</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-2.0%</td>
<td>-2.6%</td>
<td>-2.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Nonfood</td>
<td>0.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-1.0%</td>
<td>-1.5%</td>
<td>-1.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>2.4%</td>
<td>-2.7%</td>
<td>24.9%</td>
<td>-0.2%</td>
<td>-0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Books, news, etc</td>
<td>#N/A</td>
<td>1.0%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>-0.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.8%</td>
<td>1.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Other nonspecialized stores</td>
<td>#N/A</td>
<td>1.1%</td>
<td>-1.8%</td>
<td>-0.7%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>2.9%</td>
<td>-1.3%</td>
<td>2.7%</td>
<td>-0.3%</td>
<td>0.1%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">Country detail;Volume</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany: Vol ex Auto</td>
<td>3.1%</td>
<td>-1.0%</td>
<td>-1.5%</td>
<td>2.4%</td>
<td>-0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>0.4%</td>
<td>0.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK (EU):Vol</td>
<td>1.2%</td>
<td>0.9%</td>
<td>-4.2%</td>
<td>-8.1%</td>
<td>1.9%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Shaded areas calculated on a
one-month lag due to lagging data</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 15 countries are Austria,
Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body></html>

Retail sales in the Euro Area rose in August. The rise was small but it marks the second monthly rise in a row. Still the growth rates over 3 months, 6 months and 12 months are all hovering in the -2% range (saar) for the Area. The [...]

Consumer Spending and Purchase Plans in EMU

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003d.jpg" width="353">
The September Composite Index for the nonmanufacturing sector from the Institute for Supply Management slipped to 50.2 from an unrevised 50.6 during August. The figure about matched Consensus expectations.
The nonmanufacturing business activity sub-index, however, rose to 52.1 which was its highest level since May. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
The new orders sub-index also rose last month to 50.8 which was the highest level since May.
The employment index, conversely, fell m/m to 44.2 which was the lowest level since June. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003e.jpg" width="353">
Pricing power also slipped to 70.0 which was its lowest level since March. Since inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>50.2</td>
<td>50.6</td>
<td>53.2</td>
<td>53.5</td>
<td>55.7</td>
<td>58.0</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>70.0</td>
<td>72.9</td>
<td>65.0</td>
<td>63.8</td>
<td>65.3</td>
<td>68.0</td>
</tr>
</tbody>
</table>


</html>

The September Composite Index for the nonmanufacturing sector from the Institute for Supply Management slipped to 50.2 from an unrevised 50.6 during August. The figure about matched Consensus expectations. The nonmanufacturing [...]

U.S. ISM Nonmanufacturing Index Down Slightly Along With Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003a.jpg" width="353">
Nonfarm payrolls declined 159,000 during September, according to the Bureau of Labor Statistics. The latest decline was the largest during each of the last nine months and it exceeded Consensus expectations for a 105,000. It was accompanied by modest revisions to prior months&#39; figures. Payrolls have fallen by 760,000, or by 0.6%, this year.The latest figures were depressed by Hurricanes Gustav &amp; Ike.
During the last three months payrolls fell at a 0.9% annual rate. That is the quickest rate of decline during this cycle but it compares to a rate in excess of -2.0% by the end of the 2001 recession.
The length of the average workweek slipped to 33.6 hours. Combined with recent declines in employment, an unchanged workweek for 3Q versus 2Q left aggregate hours-worked down at a 2.0% rate last quarter. That suggests no growth in real 3Q GDP assuming a 2.0% rate of advance in worker productivity.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003b.jpg" width="353">
The unemployment rate held steady at 6.1% last month and that equaled expectations. Nevertheless, it was the highest level since September of 2003.
Household sector employment fell 222,000 (-0.7% y/y) after an unrevised 342,000 worker August decline. It was the seventh monthly decline this year. The level of the unemployed rose 101,000 (30.8% y/y) following a 592,000 August increase. The labor force fell 121,000 (+0.8% y/y) during September. The labor force participation rate slipped to 66.0% after three months at 6.1%. It was 66.0% during all of last year and 66.2% in 2006. The participation rate amongst adult men was unchanged at 75.8%, about the same as averaged last year, but amongst adult women, it fell to 60.8% which near the lowest level this year.
The average duration of unemployment increased by one full week to 18.4. The median duration of unemployment, however, rose to a lesser 10.2 weeks, up from 8.5 weeks during all of last year. The number of those unemployed for more than 27 weeks increased 9.1% (56.9% y/y), about as it did during August.
From the establishment survey, the number of private sector jobs fell 168,000 (-0.7% y/y). Private service sector industries fell 91,000 (0.0% y/y), the largest decline since early 2003. Nevertheless, September logged the eighth decline, and the largest, in the last nine months. Employment in trade, transportation &amp; utilities fell by 58,000 (-1.3% y/y). Retail sector jobs plunged 41,100 (-1.6% y/y) with motor vehicle &amp; parts dealers accounting for roughly a quarter of the decline. Jobs in the information sector fell 3,000 last month (-1.7% y/y) while financial sector jobs fell 17,000 (-1.3% y/y). The professional &amp; business service industry shed 27,000 (0.9% y/y) jobs. Temporary help services jobs which often are a leading indicator of employment growth, fell 24,100 (-9.1% y/y). These declines were somewhat offset by continued positive employment growth in the education &amp; health industries, up 25,000 (3.1% y/y) during September.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003c.jpg" width="353">
Factory sector jobs fell 51,000 after a 56,000 worker decline during August (-3.2% y/y). Motor vehicle &amp; parts jobs fell 18,200 (-14.1% y/y) but computer &amp; electronic product jobs were unchanged (-0.9% y/y). In the nondurables sector employment fell 14,000 (-2.3% y/y).
Construction sector employment fell another 35,000 during September which was the largest decline in three months.
Government sector jobs moved higher by 9,000 (1.4% y/y) led by a 5,000 (1.4% y/y) worker increase in state government hiring. Federal government hiring rose by 3,000 (1.1% y/y) while local governments added 1,000 (1.5% y/y) workers.
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level), fell to its lowest level of this cycle (38.1%). The three-month index also was at its cycle low (36.1%) and the three-month figure for the factory sector was even weaker at 20.8%.
Average hourly earnings rose just 0.2%. Factory sector earnings reversed their August decline and rose 0.2% (2.6% y/y) while private service sector earnings also rose 0.2% (3.4% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-159</td>
<td>-73</td>
<td>-67</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-84</td>
<td>-60</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-51</td>
<td>-56</td>
<td>-40</td>
<td>-3.2%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-35</td>
<td>-31</td>
<td>-23</td>
<td>-6.1%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (Sept. &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>6.1%</td>
<td>5.7%</td>
<td>4.7% (Sept. &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Nonfarm payrolls declined 159,000 during September, according to the Bureau of Labor Statistics. The latest decline was the largest during each of the last nine months and it exceeded Consensus expectations for a 105,000. It was [...]

Largest Decline in U.S. Payrolls Since Early 2003

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003a.jpg" align="left" border="0" height="265" width="353">
Nonfarm payrolls declined 159,000 during
September, according to the Bureau of Labor Statistics. The latest
decline was the largest during each of the last nine months and it
exceeded Consensus expectations for a 105,000. It was accompanied by
modest revisions to prior months' figures. Payrolls have fallen by
760,000, or by 0.6%, this year.The latest figures were depressed by
Hurricanes Gustav &amp; Ike.
During the last three months payrolls fell at a 0.9% annual
rate. That is the quickest rate of decline during this cycle but it
compares to a rate in excess of -2.0% by the end of the 2001 recession.
The length of the average workweek slipped to 33.6 hours.
Combined with recent declines in employment, an unchanged workweek for
3Q versus 2Q left aggregate hours-worked down at a 2.0% rate last
quarter. That suggests no growth in real 3Q GDP assuming a 2.0% rate of
advance in worker productivity.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003b.jpg" align="right" border="0" height="265" width="353">
The unemployment rate held steady at 6.1%
last month and that equaled expectations. Nevertheless, it was the
highest level since September of 2003.
Household sector employment fell 222,000 (-0.7% y/y) after an
unrevised 342,000 worker August decline. It was the seventh monthly
decline this year. The level of the unemployed rose 101,000 (30.8% y/y)
following a 592,000 August increase. The labor force fell 121,000
(+0.8% y/y) during September. The labor force participation rate
slipped to 66.0% after three months at 6.1%. It was 66.0% during all of
last year and 66.2% in 2006. The participation rate amongst adult men
was unchanged at 75.8%, about the same as averaged last year, but
amongst adult women, it fell to 60.8% which near the lowest level this
year.
The average duration of unemployment increased by one full
week to 18.4. The median duration of unemployment, however, rose to a
lesser 10.2 weeks, up from 8.5 weeks during all of last year. The
number of those unemployed for more than 27 weeks increased 9.1% (56.9%
y/y), about as it did during August.
From the establishment survey, the number of private sector
jobs fell 168,000 (-0.7% y/y). Private service sector industries fell
91,000 (0.0% y/y), the largest decline since early 2003. Nevertheless,
September logged the eighth decline, and the largest, in the last nine
months. Employment in trade, transportation &amp; utilities fell by
58,000 (-1.3% y/y). Retail sector jobs plunged 41,100 (-1.6% y/y) with
motor vehicle &amp; parts dealers accounting for roughly a quarter
of the decline. Jobs in the information sector fell 3,000 last month
(-1.7% y/y) while financial sector jobs fell 17,000 (-1.3% y/y). The
professional &amp; business service industry shed 27,000 (0.9% y/y)
jobs. Temporary help services jobs which often are a leading indicator
of employment growth, fell 24,100 (-9.1% y/y). These declines were
somewhat offset by continued positive employment growth in the
education &amp; health industries, up 25,000 (3.1% y/y) during
September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003c.jpg" align="left" border="0" height="265" width="353">
Factory sector jobs fell 51,000 after a 56,000 worker decline
during August (-3.2% y/y). Motor vehicle &amp; parts jobs fell
18,200 (-14.1% y/y) but computer &amp; electronic product jobs were
unchanged (-0.9% y/y). In the nondurables sector employment fell 14,000
(-2.3% y/y).
Construction sector employment fell another 35,000 during
September which was the largest decline in three months.
Government sector jobs moved higher by 9,000 (1.4% y/y) led by
a 5,000 (1.4% y/y) worker increase in state government hiring. Federal
government hiring rose by 3,000 (1.1% y/y) while local governments
added 1,000 (1.5% y/y) workers.
The one month diffusion index, which
measures the breadth of job gain or loss (50 is the break-even level),
fell to its lowest level of this cycle (38.1%). The three-month index
also was at its cycle low (36.1%) and the three-month figure for the
factory sector was even weaker at 20.8%.
Average hourly earnings rose just 0.2%.
Factory sector earnings reversed their August decline and rose 0.2%
(2.6% y/y) while private service sector earnings also rose 0.2% (3.4%
y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-159</td>
<td>-73</td>
<td>-67</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-84</td>
<td>-60</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-51</td>
<td>-56</td>
<td>-40</td>
<td>-3.2%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-35</td>
<td>-31</td>
<td>-23</td>
<td>-6.1%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (Sept. '07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>6.1%</td>
<td>5.7%</td>
<td>4.7% (Sept. '07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
U.S. ISM Nonmanufacturing Index
Down Slightly Along With Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003d.jpg" align="left" border="0" height="265" width="353">
The September Composite Index for the nonmanufacturing sector
from the Institute for Supply Management slipped to 50.2 from an
unrevised 50.6 during August. The figure about matched Consensus
expectations.
The nonmanufacturing business activity sub-index, however,
rose to 52.1 which was its highest level since May. Since the series'
inception in 1997 there has been a 48% correlation between the level of
the business activity index for the nonmanufacturing sector and the Q/Q
change in real GDP for the services and the construction sectors.
The new orders sub-index also rose last month to 50.8 which
was the highest level since May.
The employment index, conversely, fell m/m to 44.2 which was
the lowest level since June. Since the series' inception in 1997 there
has been a 56% correlation between the level of the ISM
nonmanufacturing employment index and the m/m change in payroll
employment in the service-producing plus the construction industries.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003e.jpg" align="right" border="0" height="265" width="353">
Pricing power also slipped to 70.0 which was its lowest level
since March. Since inception ten years ago, there has been a 60%
correlation between the price index and the q/q change in the GDP
services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report
On Business</cite>®, the composite index is calculated as an
indicator of the overall economic condition for the non-manufacturing
sector. It is a composite index based on the diffusion indexes for four
of the indicators (business activity, new orders, employment and
supplier deliveries) with equal weights. The latest report from the ISM
can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62
industries including law firms, hospitals, government and retailers.
The nonmanufacturing survey dates back to July 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
Nonmanufacturing Survey</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>50.2</td>
<td>50.6</td>
<td>53.2</td>
<td>53.5</td>
<td>55.7</td>
<td>58.0</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>70.0</td>
<td>72.9</td>
<td>65.0</td>
<td>63.8</td>
<td>65.3</td>
<td>68.0</td>
</tr>
</tbody>
</table>
Consumer Spending and Purchase
Plans in EMU 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081003f.jpg" align="left" border="0" height="265" width="353">
Retail sales in the Euro Area rose in August. The rise was
small but it marks the second monthly rise in a row. Still the growth
rates over 3 months, 6 months and 12 months are all hovering in the -2%
range (saar) for the Area. The
bottom of the table shows country by country results for Germany, Italy
and the UK. The volatility in country level sales has been substantial.
Germany saw sales volume spurt by 4.1% (ex-auto) in August. UK sales
volume rose by 1.2%. Still over three months UK sales are off at an
8.1% annual rate. German sales over three months are up at a +2.4%
pace. There is a lot of volatility in Europe. While this report seems
to show some resiliency, consumer plans to buy still seem to be skewed
sharply lower (see chart). Consumer
sentiment remains weak and the industrial sectors across Europe are
still weakening. The rise in retail sales in August seems to be more of
an anomaly than proof of resiliency.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro Area
15&nbsp; Retail Sales Volume </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area 15 Total</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-2.0%</td>
<td>-2.6%</td>
<td>-2.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Nonfood</td>
<td>0.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-1.0%</td>
<td>-1.5%</td>
<td>-1.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>2.4%</td>
<td>-2.7%</td>
<td>24.9%</td>
<td>-0.2%</td>
<td>-0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Books, news, etc</td>
<td>#N/A</td>
<td>1.0%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>-0.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.8%</td>
<td>1.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Other nonspecialized stores</td>
<td>#N/A</td>
<td>1.1%</td>
<td>-1.8%</td>
<td>-0.7%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>2.9%</td>
<td>-1.3%</td>
<td>2.7%</td>
<td>-0.3%</td>
<td>0.1%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">Country
detail;Volume</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany: Vol ex Auto</td>
<td>3.1%</td>
<td>-1.0%</td>
<td>-1.5%</td>
<td>2.4%</td>
<td>-0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>0.4%</td>
<td>0.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK (EU):Vol</td>
<td>1.2%</td>
<td>0.9%</td>
<td>-4.2%</td>
<td>-8.1%</td>
<td>1.9%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 15
countries are Austria,
Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002g.jpg" align="left" border="0" height="265" width="353">
Today Jean Claude Trichet opened the door to a consideration
of changing interest rates in the direction of a cut. It was a surprise
and the impact of the statement stung the euro. But be clear that
inflation remains wildly over the top of the ECB ceiling. Trichet
speaks of increased risk to the downside of the economy but continues
to give lip service to upside (inflation) risks lingering. It does not
seem he is yet ready to unlock the way. The way is shut, as Aragon once
was told in the Lord of the Rings trilogy. Of course he eventually
found a way to open it and save the day, as may Trichet.
And while PPI headline pressures have abated at long last, the
picture and the dynamics of the PPI are still NOT what you would like
to see if you are a central bank wanting to cut rates. The ECB that
prides itself on being a one-mandate central bank is in no position to
ague that it has done any better a job on the inflation fighting than
has the Federal Reserve in the US with multiple mandates.
The PPI fell by a sharp 0.5% in August (PPI excluding
construction) a huge drop really and with that drop, three month
inflation is now &#8216;down&#8217; to 7.3% at an annual rate. It breaks an
accelerating trend for headline inflation that is at 9.5%, higher than
its 12-month rate at 8.5% and that is higher than its year-ago annual
rate of 1.8%.
Still, PPI inflation ex-energy continued to rise. The 0.2%
gain is moderate but it comes on the heels of a 0.6% rise in July.
Three month ex-energy PPI inflation is at a pace of 4.6% over 3-and
6-months and that pace is an acceleration from its 4.3% yr/yr pace.
By component the PPI is not behaving all that well either:
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="text-align: justify;">Capital goods inflation is moderate but
still exceeds the 2% HICP ceiling that the ECB sets. Moreover at 2.5%
over three-months the pace is higher than its 2.3% over six months and
its 2.2% yr/yr. Capital goods inflation may not be accelerating that
much but it is still accelerating. Capital goods prices did rise by
just 0.1% in August, however. </li>
<li class="MsoNormal" style="text-align: justify;">Consumer goods inflation also is
excessive but this is the sort of series a central bank could live with
and still cut rates. With a rise of just 0.1% in August its three-month
pace is 2.2%, its six-month pace is 2.5% and its Yr/Yr pace is 3.8% -
far too high but definitely it has the right trend in place.</li>
<li class="MsoNormal" style="text-align: justify;">For
intermediate goods, prices rose
by 0.2% in August and at a 6% pace over three-months, a 5.8% pace over
six months and a 4.6% pace over 12-months. Not only is the pace is too
high here but the trend is all wrong.</li>
</ul>

By Country Trends: Ex
energy trends for Germany, Italy and the UK show a break off from a
pattern of acceleration in the recent three-months. Still, for each of
these counties the ex-energy PPI pace remains torrid at 3.7% over
three-months for Italy, the lowest three-month pace of the group; at
6.5% the UK has the highest 3-mo ex energy pace.
The ECB will not be making monetary policy decisions based on
the PPI. But the PPI is a pulse of inflation that the economy must deal
with as it feeds into wholesalers and retailers and exporters. We can
see clearly the weakness in the US economy and doubters now know that
Europe remains linked to the US business cycle and its brief foray with
de-coupling merely extended the leash that tethers it for a few added
months. In seeing the weak US economy especially the ongoing
construction drop and sharp fall in MFG via the ISM index Europe can
see with some clarity the road ahead. It&#8217;s no wonder that Trichet wants
to get out in front of the next big bend in the road. But he is careful
about braking too soon since inflation is closing the gap on him and
still tailgating at a rapid speed. The ECB would like inflation to show
a milder hand and a broader trend of deceleration at least ex energy to
salve its credibility were it to cut rates with the headline HICP above
2% by large margin.
This is the reason why HEADLINE INFLATION TARGETING IS WRONG.
I saw a rather dumb movie yesterday on cable in which the main
actor made the point to a little boy he was coaching. He said don&#8217;t
make a promise you can&#8217;t keep, kid: dumb movie, but good advice. Europe
and the UK have this problem to a far greater extent than does the US.
While the US central bank is still criticized for targeting the wrong
thing (core) The Fed is closer to keeping inflation within reason of
its &#8216;zone of preference&#8217; than is the ECB. Interestingly each country
has very similar year over Year headline and core inflation traits. So
the ECB&#8217;s headline pledge did not really cause it to react any
differently than did the Fed. I would repeat this notion that for a
central bank you should not target something unless to are serious
about hitting it. And no one is serious about containing inflation at a
2% ceiling as oil prices spurt as they did. For core inflation that&#8217;s
another matter. And even with its banking crises and dual mandate the
Fed is holding closer to its desired mark than is the ECB &#8211; and by a
long shot. So who has credibility here: the Fed or the ECB?

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area and UK PPI Trends</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">Euro Area 15</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Harmonized PPI excl Construction</td>
<td>-0.5%</td>
<td>1.3%</td>
<td>7.3%</td>
<td>9.5%</td>
<td>8.5%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.2%</td>
<td>0.6%</td>
<td>4.6%</td>
<td>4.6%</td>
<td>4.3%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Gds</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Gds</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>3.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>0.2%</td>
<td>0.7%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>-2.5%</td>
<td>3.2%</td>
<td>14.8%</td>
<td>25.2%</td>
<td>22.5%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>3.1%</td>
<td>7.1%</td>
<td>6.5%</td>
<td>2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-0.6%</td>
<td>2.0%</td>
<td>9.2%</td>
<td>10.4%</td>
<td>8.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.2%</td>
<td>0.7%</td>
<td>4.6%</td>
<td>4.3%</td>
<td>3.5%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>5.4%</td>
<td>8.6%</td>
<td>8.2%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.7%</td>
<td>4.6%</td>
<td>4.2%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>-1.8%</td>
<td>0.9%</td>
<td>7.3%</td>
<td>16.5%</td>
<td>18.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.2%</td>
<td>0.6%</td>
<td>6.5%</td>
<td>9.8%</td>
<td>7.7%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">The EA 15
countries are Austria,
Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body></html>

Today Jean Claude Trichet opened the door to a consideration of changing interest rates in the direction of a cut. It was a surprise and the impact of the statement stung the euro. But be clear that inflation remains wildly over the [...]

EMU PPI Finally Loses Some Momentum

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002e.jpg" width="353">
Factory inventories increased another 0.6% during August, the same as during July. That lifted the y/y gain to 8.6%, its strongest since late 2006. Growth in inventories within the transportation sector has been strong at 14.6% y/y. Yet less the transportation sector inventory growth similarly was firm. The y/y gain of 7.5% was the strongest since late 2006.
Inventories of transportation equipment has been notable at 14.6% y/y led by a 32.6% bulge in inventories of nondefense aircraft &amp; parts. Defense aircraft inventories also were strong and posted a 12.9% jump. Automobile inventories fell 6.0% y/y and light truck inventories were off 15.4%. Growth in inventories of primary metals also has been notable at 11.9% y/y while fabricated metals inventories rose 8.0%. Electrical equipment &amp; appliance inventories grew a stable 5.4% while growth in machinery inventories also was stable at 6.4%.
Total factory orders fell 4.0% during August versus expectations for a 2.4% drop. The decline reflected the already reported 4.8% shortfall in durable goods orders. They were pulled lower by a 9.1% decline in new orders for transportation equipment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002f.jpg" width="353">
Factory shipments similarly dropped 3.5%, led by an 8.0% (-15.5% y/y) drop in transportation sector shipments. Shipments of electrical equipment also were weak and they posted a 4.6% (-1.2% y/y) decline. Electronic computer shipments fell 3.3% (-11.8% y/y) as did shipments of furniture &amp; related products (-6.4% y/y). Shipments from petroleum refineries were weak last month and posted a 9.1% drop with lower prices. Year-to-year, however, they were still up 49.6%.
Overall unfilled orders rose 0.4% and 12.9% y/y. Much of the strength over the last year has been due to the 24.5% gain in order backlogs of nondefense aircraft &amp; parts. Order backlogs for electronic computers fell slightly but order backlogs of machinery surged (23.2% y/y).
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos0908.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.6</td>
<td>0.6</td>
<td>8.6</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.6</td>
<td>0.5</td>
<td>7.5</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-4.0</td>
<td>0.7</td>
<td>4.2</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.3</td>
<td>0.5</td>
<td>8.4</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-3.5</td>
<td>1.4</td>
<td>5.3</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-2.9</td>
<td>1.3</td>
<td>8.7</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.4</td>
<td>0.8</td>
<td>12.9</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.2</td>
<td>0.9</td>
<td>9.3</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
</body>
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Factory inventories increased another 0.6% during August, the same as during July. That lifted the y/y gain to 8.6%, its strongest since late 2006. Growth in inventories within the transportation sector has been strong at 14.6% y/y. [...]

U.S. Factory Inventory Level Continued Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002c.jpg" width="353">
Initial claims for unemployment insurance rose to 497,000 from an upwardly revised 496,000 during the week prior. The latest was the highest level since the recession of 2001.
The four-week moving average jumped to 474,000 (48.8% y/y) which also was the highest level since the last recession. During August initial claims averaged 443,000.
A claims level below 400,000 typically has been associated with positive growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002d.jpg" width="353">
Continuing claims for unemployment insurance during the latest week rose another 48,000 after a 95,000 rise during the prior period. The four-week average of claims rose to 3,528,500. That was the highest level since 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable at 2.7%. The rate for the previous week was upwardly revised and it is the highest level since late-2003.
Technology shocks, employment, and labor market frictions from the Federal Reserve Bank of Boston is available <a href="http://www.frbatlanta.org/filelegacydocs/wp0810.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">09/27/08</th>
<th scope="col">09/20/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;497</td>
<td>496</td>
<td>53.4%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,591</td>
<td>40.5</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
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Initial claims for unemployment insurance rose to 497,000 from an upwardly revised 496,000 during the week prior. The latest was the highest level since the recession of 2001. The four-week moving average jumped to 474,000 (48.8% y/y) [...]

U.S. Initial Claims For Unemployment Insurance Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002b.jpg" width="353">
U.S. September sales of light vehicles reversed their August rise and fell 8.9%, according to the Autodata Corporation. The sales rate of 12.50M units fell back to its July level, which was the lowest sales rates since 1992. Sales for the year so far have averaged a 14.12M annual selling rate, down 12.8% from the first nine months of last year. The level of September vehicle sales was quite a bit weaker than Consensus expectations for sales of 13.5M.
Sales of domestically made light vehicles reversed half of their August gain and fell 8.3% (-23.4% y/y) to 9.44M units. Year-to-date, sales were down 14.8% from the first nine months of last year. Domestically made light truck sales continued to suffer due to higher gasoline prices, falling 11.8% (-28.1% y/y). That decline reversed nearly half of their 28.1% August gain. Truck sales this year were 21.1% lower than during the first nine months of 2007. Sales of U.S.- made cars fell a lesser 3.7% from August. Drivers&#39; shift to purchases of relatively fuel efficient vehicles left sales down a less severe 5.9% versus the first nine months of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081002a.jpg" width="353">
Sales of imported light vehicles fell a sharp 10.5% (-20.7% y/y) in September to 3.06 million units, the lowest level since 2002.Sales of imported autos dropped another 16.5% m/m to 1.94M on top of their 8.4% decline. The latest was their lowest sales rate since January 2006. Year-to-date, sales were down 6.8% from the first nine months of 2007.Imported light truck sales ticked up another 2.3% (-24.7% y/y). However, they too felt the effect of higher fuel costs and were down 15.4% versus the first nine months of last year.
Import&#39;s share of the U.S. light vehicle market fell again, last month to 24.5%, the lowest since this past January. (Imported vehicles are those produced outside the U.S. and does not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.).
Who really made your car? from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfloctober2008_255a.pdf">here</a>.
Economy in lower gear through 2008 also from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2008_253a.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>12.50</td>
<td>13.72</td>
<td>-22.8%</td>
<td>16.17</td>
<td>16.54</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.19</td>
<td>6.74</td>
<td>-17.2</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.25</td>
<td>4.41</td>
<td>-16.8</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.94</td>
<td>2.33</td>
<td>-18.2</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>6.31</td>
<td>6.98</td>
<td>-27.6</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>5.19</td>
<td>5.89</td>
<td>-28.1</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.12</td>
<td>1.09</td>
<td>-24.7</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>


</html>

U.S. September sales of light vehicles reversed their August rise and fell 8.9%, according to the Autodata Corporation. The sales rate of 12.50M units fell back to its July level, which was the lowest sales rates since 1992. Sales for [...]

U.S. Light Vehicle Sales Backpedal

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

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Durable goods orders fell 9.3% (+10.9% y/y) in during June after rising 16.5% in May, revised from 16.4%. Orders in April fell 6.6%. A 10.0% decline had been expected in the Action Economics Forecast Survey.

The decline reflected a near-halving of orders for commercial aircraft which pulled total transportation equipment orders down 22.4% (+30.5% y/y). Orders excluding transportation rose 0.2% last month (2.2% y/y) after a 0.6% rise in May. Orders for computers & electronic products rose 0.6% (4.8% y/y) after rising 1.7% in May. Orders for machinery gained 0.4% (3.2% y/y) for the second straight month while electrical equipment, appliances & components orders inched 0.1% higher (4.7% y/y) following a 0.8% May rise. Primary metals orders gained 0.6% (-0.5% y/y) in June following a 0.7% gain and fabricated metals orders rose 0.2% (3.2% y/y) after surging 1.1% in May. Defense aircraft orders rose 9.1% (7.4% y/y) after a 10.2% May decline.

Total shipments increased 0.4% (1.8% y/y) in June following a 0.2% May rise. Shipments of durable goods industries rose 0.5% (2.9% y/y) in June after improving 0.2% in May. Transportation equipment shipments rose 0.8% (4.2% y/y) and machinery shipments gained 1.0% (1.5% y/y). Computer & electronic product shipments edged 0.1% higher (6.3% y/y) and electrical equipment & appliance & components shipments rose 0.7% (4.9% y/y). Primary metals shipments gained 0.6% (2.5% y/y) while fabricated metals shipments rose 0.2% (1.9% y/y). Shipments of nondurable goods 	rose 0.4% (0.6% y/y) following a 0.1% gain.

Unfilled orders for all manufactured products jumped 1.0% (7.1% y/y) in June after a 3.4% May rise. Excluding transportation, unfilled orders rose 0.1% (0.8% y/y), the same as in May. Backlogs of durable goods rose 1.0% (7.1% y/y) in June, reflecting a 1.6% jump (11.4% y/y) in transportation equipment, led by a 2.1% rise (14.7% y/y) in nondefense aircraft. Machinery backlogs eased 0.1% (-1.8% y/y) in June. Electrical equipment, appliances & component backlogs rose 0.1% (1.0% y/y). Order backlogs of computers & electronic products eased 0.1% (-0.2% y/y), off slightly for the third straight month.

Inventories of all manufactured products rose 0.2% (1.1% y/y) in June following a 0.1% gain in May and a 0.1% April decline. Durable goods inventories rose 0.2% (1.5% y/y) for the second straight month. Inventories of machinery gained 0.4% (2.3% y/y) while computer & electronic product inventories rose 0.1% (0.3% y/y) for the second straight month. Transportation inventories eased 0.1% (+1.6% y/y).

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Orders excluding transportation weaken.
- Shipments strengthen.
- Unfilled orders surge, led by aircraft; inventories increase slightly.

U.S. Advance Durable Goods Orders Decline in June as Aircraft Bookings Plunge

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Hypnotists are just trying to get you to focus on something and concentrate on it so that you can relax and they can put you into a hypnotic trance. Right now, you want to make sure that does not happen as you watch what is going on with money supply. It is not ‘entrancing’ and ought to be followed. The chart shows you that trends - and often excesses in ‘global money supply’ growth have begun in that money center country, the United States of America. And… well… here we go again? While it's very early in the game, it looks like, after a period of monetary weakness and re-escalation, U.S. money growth is now beginning to step up in the U.S. Meanwhile, in Europe and in the United Kingdom, money growth, especially real money growth, is beginning to tail off. All this is at a time when Japan's money growth, of course, has been marching to the step of a different drummer showing regular, consistent, nominal weakness and actual declines in the real money stock to try to tame its incipient inflation.

**The Policy Zone**
We are no longer in the COVID era; or even in the post-COVID era. We are now in the post post-COVID era. And monetary policy is being made based on conditions rather than remedy perceived legacy problems in the economy from COVID. We need to make that transition in our analysis too, and ask ourselves, “What's really happening?” In the U.S., the popular dogma is to claim that central bank independence is being undercut and that Donald Trump's tariffs are going to raise the inflation rate and that the Fed is losing its battle with inflation and inflation is coming because of excessive fiscal policy and the imposition of tariffs. It's a story you can believe if you want to. There's certainly some evidence to support those points; whether they completely justify that point of view, it is still too early to say. However, clearly, money supply growth in the U.S. is ramping up. The U.S. 12-month growth rate is up to 4.5%, over six months the annualized rate hits 5.5%, and over three months the annualized rate hits 6.9%. It's hard to say that that's occurring because of Trump's tariffs. At the same time, the growth rate in real money balances - that's money supply deflated by the CPI - has boosted its growth rate from 1.8% over 12 months to a 2.9% annual rate over six months to a 4.4% annual rate over three months. Is the chase on for an inflation ‘uptick’ that will not be temporary?

**Follow the leader, or go your own way?**
It will take some time to tell if the other money center countries are going to follow the leader or not. So far it looks like ‘or not.’ Money supply growth in the European Monetary Union (EMU) is actually decelerating slightly from 2.8% over 12 months to a 1.7% pace over six months to a 1.3% pace over three months. Similarly, in the EMU the growth of real balances has slipped from 0.8% over 12 months to a 0.2% annual rate over six months to a -0.6% annual rate (contraction) over three months. So far, euro area money supply is not tagging along with the U.S. trend.

**Euro-credit trends**
Meanwhile, private credit growth in Europe has stabilized with the 12-month growth rate of 2.3% that moves up to 2.4% over six months and settles back to 2% over three months, a relatively stable performance that would seem to signal ongoing moderate growth. The growth rate of private credit, deflated for the effects of inflation, shows continued growth, and beyond that the trend is unclear. Over 12 months the growth rate is 0.3%, over six months that improves to 0.8%, and over three months it drops back to a 0.1% pace. I'm not good enough at splitting hair to be able to tell you what that trend is.

**U.K. money weakens**
In the U.K., nominal money supply growth seems to be slowing, but that isn't crystal clear, with the 3.5% annual rate over 12 months moving up to a 4.1% annual rate over six months been slipping back to 1.7% over three months. It may take a few months to be able to tell if the step down to 1.7% is real or just volatility averaging out the step up over six months. U.K. money growth does not appear to be excessive or rogue; when we look at real balances, 12-month growth is -0.4%, six-month growth is -0.1% and the three-month growth rate is -1.6%. On that profile, real money growth in the U.K. does not appear to be following the U.S. rule book either.

**Japan- dealing with its own complex issues**
We know that Japan has been off on its own for a while. Japan clearly has been fighting off a bout of inflation. But, since that development is relatively new, and the previous battle with deflation was relatively long-lived, if we think in terms of inflation averaging, Japan is still dealing with an extremely small problem. Despite the appearance of some real inflation (depending on the price index you look at to establish Japanese inflation trends), Japan's inflation overshoot in contexts is only making up for lost time.

Money growth in Japan is 0.9% over 12 months; however, it's only running at a 0.1% annualized over six months and over three months. The growth of real money balances in Japan is negative. Real balance growth rates are negative on balance over three years and two years; the 12-month growth rate for real money balances is -2.3%, over six months it is -2.2%, and over three months it is -2%. The degree of restriction has faded but faded only very marginally. The main point is that in Japan, real money balances are contracting and so there is a fight to reduce inflation going on behind the scenes and that's clearing up; you can see it in the money growth rates on the chart as well if not from the level or real interest rates. Japan is balancing complex needs.

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**Are tariffs a threat or benign?**
As we sharpen our pencils or fill in our spreadsheets with guesses at the independent variables, and try to predict the future, let's not obsess too much about the independence and credibility of central banks and put too much of the blame on developing tariff policy. I'm not prepared to argue the tariffs are unimportant. In the short run, they could create some difficult decisions for monetary policy agencies. And beyond tariffs, let’s remember that the collapse of Bretton Woods and the installation of fluctuations exchange rates also did usher in an age of higher inflation. Exchange rate changes, like tariffs, are not formally inflationary but they do change (like tariffs) relative prices. There is more discussion about inflation and exchange rates than about inflation and tariffs mostly because exchange rate fluctuations became more pronounced after 1971 while tariffs were mostly being cut in periodic multilateral rounds until recently. The absence of a literature on tariffs and inflation is an artifact of economic circumstance.

**The road ahead and the traffic around us**
Whatever the ‘threat’ of tariffs, the trends in money supply are more fundamental and certainly something you don't want to lose track of although many people do lose track of money supply these days. Central banks have certainly downgraded money supply. In the U.S., relevant money supply data are released much less frequently and the data we are provided with is much less thorough than it used to be. Central banks want to be known for their interest rate policy and inflation targeting. A strange desire after they have been so unsuccessful at hitting those targets over the past four years… But of course, there are policy tools to focus on: the official interest rate the central bank implements, the guidance it gives us about the future, the way that markets price themselves relative to the central bank rate which affects the way interest rates work their way into the economy… And then, of course, there is the issue of what inflation is, and what it will be, and what assumptions monetary policy makes when it evaluates itself to decide how it's going to be presented to the public by the central bank. All of this leaves a lot of room for discretion and slippage and what monetary policy really is. It puts the central bank in a position to - as always - occupy the bully pulpit and to steer the discussion in the direction they want which inevitably is the direction that justifies the kind of policy they've decided to run. Now is a good time to pull yourself out of that cycle to step back and to look objectively at what's happening with money supply and policy and to think about what happens next. Policy is not completely about politics after all. Tariffs are not the keystone to build an outlook for the future.

Global Money Supply Begins to Show Divergences; Watch the Green Line and Don’t Get Sleepy

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Sales of new single-family home sales improved 0.6% (-6.6% y/y) in June to 627,000 (SAAR) after falling 11.6% to an unrevised 623,000 in May, and rising to 705,000 in April, revised from 722,000 according to the U.S. Census Bureau. The Action Economics Forecast Survey expected sales of 650,000 in June. The sales gain occurred as the average 30-year fixed-rate mortgage held steady m/m at an average 6.82% in June, according to Freddie Mac. So far in July the 30-year mortgage rate has fallen to an average 6.71% and compares to a low of 6.18% averaged in September of last year.

By region, new home sales varied across the country last month. Sales of new homes in the Midwest rose 6.3% (9.0% y/y) to 85,000, after falling 3.6% during May. In the South, new home sales rebounded 5.1% (-4.4% y/y) to 390,000, following a 15.1% May decline. Offsetting these gains, sales of new homes in the West weakened 8.4% (-14.4% y/y) to 131,000, after declining 8.3% in May. Showing even more weakness, new home sales in the Northeast were off 27.6% last month (-34.4% y/y) to 21,000, after holding steady in May.

The median sales price of a new home declined 4.9% (-2.9% y/y) to $401,800 (NSA) in June after rising 2.3% to $422,700 in May. New home prices were 12.7% below the all-time peak of $460,300 in October 2022. The average sales price of a new home fell 2.1% (+1.1% y/y) to $501,000 in June, following a 0.4% May decline. The average price was 7.4% below a high of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market rose 1.2% (8.5% y/y) to 511,000 (SA) in June, after a 1.0% May increase. The seasonally adjusted months' supply of new homes for sale rose to 9.8 months in June, the highest level since September 2022, after increasing to 9.7 months in May. The latest reading remained above a low of 6.9 months in May 2023.

The median number of months a new home stayed on the market increased to 2.8 months in June, remaining above a June 2024 low of 2.1 months. The latest number stood well above its record low of 1.5 months in both September and October of 2022, but remained below a high of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Small gain in sales follows sharp decline.
- Sales are mixed throughout the country.
- Median sales price is lowest since November.

U.S. New Home Sales Improve Slightly in June; Prices Decline Sharply

Winnie Tapasanun

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The Kansas City Fed manufacturing composite index inched up to 1 in July from -2 in June and -3 in May, the July 2025 Manufacturing Survey by the Federal Reserve Bank of Kansas City showed, indicating Tenth District manufacturing activity increased slightly this month. The headline index was last positive in September 2022 (with a reading of 6). The July index was up from -11 in July 2024 but well below a high of 30 in March 2022. “The increase from last month was driven by nondurable manufacturing, while durable manufacturing activity continued to fall,” the Kansas City Fed reported.

The ISM-adjusted index calculated by Haver Analytics rebounded to 50.2 (NSA) in July after a 1.3-point decline to 49.8 in June, indicating expansion in factory activity for the fourth time in five months. The latest ISM-adjusted figure was above a low of 43.7 in July 2024 but well below a record-high 68.9 in March 2022.

In the latest survey, the new orders index rose to 2 in July, the first positive reading and the highest since July 2022, after a seven-point increase to -2 in June. Thirty percent of respondents (NSA) reported orders gains in July while 33% reported declines. The production index, however, fell to -3 this month after a 15-point rebound to 5 in June; these readings were well below a high of 35 in March 2022. The shipments index decreased to 3 in July after an 18-point jump to 8 in June; thus, having remained down from a peak of 39 in March 2022.

The raw materials inventory index rose to 8 in July following a 12-point drop to -9 in June, registering the second positive reading in three months and the highest since September 2022. These figures were above a low of -17 in July 2024 but well below a high of 28 in March 2022. The order backlog index, having remained negative since October 2022, plunged to -30 in July, the lowest reading since September 2024, after a 12-point rebound to -11 in June; these numbers were significantly below a record-high 43 in July 2021. Meanwhile, the supplier delivery time index rose to 7 in July, the highest reading since April, after rising to 5 in June; these readings remained well below a high of 51 in March 2022.

On the labor front, the employment index declined to -11 in July after an 11-point drop to -8 in June, posting the fifth negative reading in six months and the lowest in three months. The index was down from a high of 30 in May 2022. A lessened 13% of respondents (NSA) reported increases in the number of employees in July while a steady 23% reported decreases.

On the pricing front, the prices received index for finished products fell to 18 in July following a four-point increase to 21 in June. These readings, while up from a low of -5 in September 2024, remained well below a high of 50 in June 2022 and a record-high 63 in August 2021. Twenty-one percent of respondents (NSA) reported higher prices received in July while 6% reported price declines. The prices paid index for raw materials fell to 47 this month after a 17-point jump to 51 in June. These figures were up from a low of -1 in October 2023 but significantly down from a high of 72 in April 2022 and a record-high 85 in October 2021.

Expectations for future activity continued to stay positive, with activity in most categories expected to gain. The expectations index for six months ahead was at 8 in July, slightly down from 9 in June and up from 5 in May. The expectations indexes for raw materials inventories (8) and supplier delivery time (5) rose in July, while those for production (14), shipments (11), new orders (8), and employment (4) fell for the month; nevertheless, they remained in positive territory. To the negative side, the expectations indexes for new orders for exports (-8), backlog of orders (-5), and capital expenditures (-4) registered negative readings. The expectations index for raw materials prices held steady at a still-high 64 in July compared to a low of 13 in June 2023; the index for finished goods prices was unchanged at 48 vs. a low of 15 in October 2023.

The latest survey was conducted for a six-day period from July 16-21, 2025 and included 105 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

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- July Composite Index at 1 reflects positive numbers in materials inventories (8) and new orders (2), while employment (-11) and production (-3) post negative readings.
- Price growth cools somewhat, w/ prices paid down 4 pts. to 47 and prices received down 3 pts. to 18.
- Expectations for future activity, while edging down to 8, remain in positive territory.

Kansas City Fed Manufacturing Index Rises in July; First Positive Reading Since Sept. ’22

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The National Activity Index (CFNAI), reported by the Federal Reserve Bank of Chicago, stood at -0.10 in June following a reading of -0.16 in May, revised from -0.28, and -0.41 in April, revised from -0.36.

The index's three-month moving average, which smooths out the m/m volatility in the index, fell to -0.22 last month from -0.14 in May. This reading compares to its zero value, which equals trend real GDP growth. Research at the Chicago Fed indicates that an average reading of -0.70 or below is consistent with the economy being in a recession.

The June reading reflected a negative contribution from each of the four component series. The Production & Income index of -0.01 compared to -0.06 in May and -0.19 in April. The Personal Consumption & Housing contribution of -0.01 in June compared to -0.10 in May and -0.02 in April. The Sales, Orders & Inventories index series of -0.04 in June compared to +0.01 in May and -0.18 in April. The Employment, Unemployment & Hours index weakened to -0.05 last month after contributing -0.01 in May and -0.02 in April.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, stood at -0.37 in June compared to -0.32 in May and -0.08 in April. A reading of zero indicates that all of the indicators are growing at their long-term average. Thirty-seven of the 85 individual data series made positive contributions to the total index in June while 48 contributed negatively.

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.

- Latest reading improves versus May.
- Each of four components are negative.
- Three-month trend weakens.

Economy in Brief: 2008

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Consumer Spending and Purchase Plans in EMU

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Largest Decline in U.S. Payrolls Since Early 2003

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